The distribution of potential active weights in a long only strategy is assymetric. A long-short investor can create a symmetric distribution of active weights by taking either long or short positions. Anyone can explain this please?
In a long only strategy you can over weight much more than you can underweight. Underweight is limited to zero. So for example, if benchmark has 10% of Apple stock you can over weight to 50% but the most you underweight is to 0%. In a long short you could overweight by 50% AND underweight to -50%
Spot on! Thanks